The projected cash flow of firms in highly cyclical industries can be distorted depending on where the firm is in the business cycle.

Question

Quizplus · Accepted Answer

The cash flow of firms in highly cyclical industries, such as the construction or automotive industries, can be greatly influenced by the stage of the business cycle. During peak periods of high demand, cash flow may be strong, but during downturns, cash flow may plummet. This can make it more difficult to accurately project future cash flows for these types of firms.

The Projected Cash Flow of Firms in Highly Cyclical Industries